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The Forum > Article Comments > Propping up Australian real estate > Comments

Propping up Australian real estate : Comments

By Bryan Kavanagh, published 13/1/2010

We tax people who are doers, yet reward those who live off the citizens’ rent.

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If we were to collect the greater part of the imputed land rent that you refer to as 'baseless piffle', David, we wouldn't be having this GFC. Tax people for working, you'll have less work; tax people for speculating in baseless piffle you'll have no real estate bubbles that have a habit of bursting into recessions.
Posted by Bryan Kavanagh, Wednesday, 20 January 2010 7:38:36 PM
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That's a new angle, grputland.

>>In the case of land, one must distinguish between the original supplier (Nature/God/Providence/whatever) and the middlemen (landlords, sellers). The..."tax" is payable whether the land is offered to the market or not; that is, it is levied on the land as supplied by the original supplier, not as supplied by the middlemen.<<

You propose to tax God?

I wish you luck in tracking down his postal address.

What you managed to do, of course, is to single-handedly demolish your own argument on inelasticity of supply.

>>The [landlords, sellers] can withhold land from the market and thereby vary the supply offered BY THEM<<

Using your logic, you can apply the same construction to saucepans. The supply of alumina is finite, the original supplier is God. Despite the antics of the middle-men (saucepan manufacturers) the supply of alumina is rigidly inelastic, therefore any tax on aluminium products (e.g. GST) cannot be passed on to the consumer.

Hardly.

You use similar logic on the community creation of capital gains.

>>the first time someone dug a well, causing an increase in the desirability of a nearby location claimed by someone else<<

But the water that the well was accessing was provided by...

Yup. That man again.
Posted by Pericles, Thursday, 21 January 2010 8:16:37 AM
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Pericles:

> That's a new angle, grputland.

I suppose it would be for those who buy the property lobby's arguments.

> You propose to tax God? I wish you
> luck in tracking down his postal address.

I propose to "tax" the middlemen on the supply defined by "God". The middlemen pay because (as you imply) God won't.

That's looking at the God/owner step in the supply chain. If, instead, we look at the owner/renter step, the owners become the suppliers. But this is not the role in which the owners are "taxed", because the "tax" isn't on the supply as defined BY THEM.

Either way, the conclusion is the same: the renters don't pay.

> What you managed to do, of course, is to
> single-handedly demolish your own argument
> on inelasticity of supply.

No, I neutralized what I understood to be *your* argument. You quote me:

> > The [landlords, sellers] can withhold land
> > from the market and thereby vary the supply
> > offered BY THEM
>
> Using your logic,...

No, you're the one who's trying to undermine inelasticity of supply -- remember?

But anyway...

> you can apply the same construction to saucepans.
> The supply of alumina is finite,

That's NOT the same logic, because in that context the "supply of alumina", like the buying and selling of saucepans, is a FLOW, not a stock. And the FLOW is variable even if the stock isn't.

The supply of land for SALE, as opposed to mere ownership, is likewise variable. Hence a tax on the SALE of land can be passed on, at least in part, to the buyer, although a tax on the OWNERSHIP cannot. Nowhere do I deny that.

But if you insist on confusing the God/owner step with the owner/renter step, and stocks with flows, you can reach any conclusion you like.
Posted by grputland, Thursday, 21 January 2010 9:22:08 AM
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But this imputed land rent is a false figure. It does not exist. It assumes a 5% return on land based on land values. But there is no proof that all land owners are earning anything like this amount.

Notwithstanding the effect it would have on land prices, its a bad idea.

For example, if I own land worth $1 million then 5% of that would be worth $50,000. Now if I live on that land then I'm not earning anything from it - there is no rent.

Even if I rented it out and earned $50,000 rent from it I would already be paying tax on it because it forms part of my overall income.

If I earned a salary of $150,000 pa and paid 30% tax overall - that would be $45,000 then this figure is comparable to the taxable amount of "land income." But if you taxed me at 100% of land income I would be worse off - so good luck getting me to vote for that.

If you taxed me at a lower rate, and abolished income tax (yay!), then ok I would be better off. Or would I?

Well then lets say you taxed me at 75% of land income or $37,500 then I'm paying less tax, as is everybody else. But then the Government collects less tax - so less money for health (hello ageing population), less money for education (hello illiterate white kids), less money for roads, defence, police, etc. So overall I'm actually kind of poorer and really all that you've done is change the label on income tax.
Posted by David Jennings, Thursday, 21 January 2010 12:09:49 PM
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No, no, David, 'taint simply a name change. Why not? Well, my colleague Gavin Putland gives pretty well the full story at http://blog.lvrg.org.au/2010/01/problem-price-of-land-is-infinite.html (esp. good figures at 5.6).
Posted by Bryan Kavanagh, Friday, 22 January 2010 6:22:53 AM
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But is David correct in saying that the 32% of GDP is not a real figure?
Posted by Lucy Montgomery, Friday, 22 January 2010 8:57:32 AM
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